Business, 18.03.2020 04:09, ravenhudsonmail46
An agency relationship can degenerate into an agency conflict when an agent acts in a manner that is not in the best interest of his or her principal. In business, these conflicts most frequently involve the enrichment of the firm's executives or managers (in the form of money and perquisites or power and prestige) at the expense of the shareholders. This usurping of shareholder wealth is most likely to occur when shareholders do not have sufficient information about the decisions and actions being made by the firm's management.
a) Consider the following scenario and determine whether an agency conflict exists:
Daniel owns Daniel's Tantalizing Tees, a T-shirt shop in a small college town in Kansas. With a staff of three part-time employees, Daniel operates the business in accordance with his personal goals, dreams, and capabilities.
1. Does Daniel have an agency conflict to deal with?
O No; by having part-time, as opposed to full-time, employees, Daniel is prevented from experiencing an agency conflict.
O Yes; as both the owner and operator of Daniel's Tantalizing Tees, Daniel has created the necessary agency relationship through which an agency conflict can exist.
O No; as both the owner and operator of Daniel's Tantalizing Tees, Daniel has not created the necessary agency relationship through which an agency conflict can exist.
O Yes; there is always an inherent conflict of interest between owners and operators (managers).
Answers: 2
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An agency relationship can degenerate into an agency conflict when an agent acts in a manner that is...
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